MARUBENI EUROPE PLC€¦ · Marubeni Europe plc DIRECTORS’ REPORT 5 Registered No. 01885084 The...

Marubeni Europe plc

Report and Financial Statements

31 March 2017

Marubeni Europe plc

REPORT & FINANCIAL STATEMENTS AS AT 31 MARCH 2017

1

CONTENTS

Corporate information 2

Strategic report 3

Directors’ report 5

Statement of directors’ responsibilities 7

Independent auditor’s report 8

Income statement 10

Statement of other comprehensive income 11

Statement of changes in equity 12

Balance sheet 13

Notes to the financial statements 15

Marubeni Europe plc

REPORT & FINANCIAL STATEMENTS AS AT 31 MARCH 2017

2

CORPORATE INFORMATION

DIRECTORS

N Iwashita

T Hirano

J Kakizoe

H Miyazawa

T Tanaka

H Urata

SECRETARY

M Hammill

AUDITORS

Ernst & Young LLP

1 More London Place

London SE1 2AF

SOLICITORS

Clifford Chance LLP

10 Upper Bank Street

London E14 5JJ

REGISTERED OFFICE

95 Gresham Street,

London,

EC2V 7AB

Marubeni Europe plc

STRATEGIC REPORT (CONTINUED)

3

The directors present their strategic report for the year ended 31 March 2017.

PRINCIPAL ACTIVITIES

The Company’s principal activities during the year continued to be international trading in a broad range

of chemical, forest and agricultural products, consumer goods and other commodities, as well as activities

in the power, plant, energy, transportation and industrial machinery sectors. The Company also holds

share participations in a number of group companies operating in diverse business fields, or engaged in a

variety of projects. The principal activities and operations of the Company are expected to continue as

described above.

BUSINESS REVIEW

Marubeni Europe plc (“the Company”), a wholly-owned subsidiary of Marubeni Corporation, is

headquartered in London, England and operates also through European branches in France, Germany,

Italy and Spain.

The Company’s profit for the year, after taxation, is €13,940,000.

The directors are pleased to report continuing profitable operations for the year ended 31 March 2017,

extending the run of consistent net profits achieved over each of the past six years. Operating profit of

€17,555,000 was €9,282,000 higher than the operating profit of the comparative period. The above figure

for operating profit includes dividends received from the Company’s equity holdings in investee

companies, which are included within interest receivable and similar income in the income statement.

Key performance indicators

The Company’s key financial and other performance indicators during the year the directors have

identified the following:

2017 2016 Change

€’000 €’000 %

Turnover 535,627 480,566 11.5%

Gross profit 53,627 41,796 28.3 %

Operating profit 17,555 8,273 112.2 %

Net interest earned 6,391 4,854 32.0 %

Profit for the year 13,940 6,879 102.6%

Shareholder’s equity 224,500 222,402 0.9%

Average number of employees (including secondees) 210 197 6.6 %

The Company considers gross profit to be reflective of its core trading performance and this has increased

by €11,931,000 to €53,627,000. The increase is mainly in relation to the provision of additional services

to Marubeni Corporation and fellow group entities. From a financing activities perspective, increase in net

interest earned by €1,537,000 is mainly due to improvement in the dividend income received from the

Company’s investees.

PRINCIPAL RISKS AND UNCERTAINTIES

The Company’s business, in common with other general trading companies, is closely linked to its

ultimate parent company and the wider Marubeni Corporation group with respect to trading transactions,

ability to obtain funding and the reduction of credit risk. The Company continues to enjoy steady growth

and has reported profitable operations in each of the past six years, and accordingly the directors believe

that it remains well positioned to continue to generate future trading profits.

Marubeni Europe plc

STRATEGIC REPORT (CONTINUED)

4

The directors recognise that the Company faces a wide range of financial and market risks in conducting

its worldwide business activities. The principal risks and uncertainties are recognised as being financial,

exchange, credit, liquidity and cash-flow risks. The directors consider the management of risk to be an

important part of their function, and have put in place various strategies for the Company and group

undertakings, with the aim of limiting exposures to each of the above risks. These strategies to reduce the

principal risks and uncertainties include the use of hedging, insurance, diversification of trading activities,

and the use of financial instruments to fix price or forecast foreign exchange requirements as they arise.

The Company also takes steps to ensure its ongoing liquidity by negotiating adequate stand-by credit

facilities with banks and financial institutions. These arrangements are more fully described in note 1 of

the financial statements. The directors have also implemented a comprehensive set of policies and

guidance for business conduct, corporate governance and internal control. Given the on-going uncertainty

in financial markets, the directors believe that a strong system of internal controls, combined with a focus

on compliance and risk management, will contribute to the long-term survival and prosperity of the

Company through periods of economic uncertainty. The directors intend to continue to promote core

trading operations whilst also seeking new opportunities for investment and diversification within risk

parameters acceptable to the Company.

Signed on behalf of the board

T Tanaka Director 28 June 2017

Marubeni Europe plc

DIRECTORS’ REPORT

5

Registered No. 01885084

The directors present their report for the year ended 31 March 2017.

DIRECTORS OF THE COMPANY

The following served as directors of the Company during the year and up to the date of signing these

financial statements:

N Iwashita

H Urata

J Kakizoe

H Miyazawa

A Takahashi (appointed 01/04/16, resigned 01/04/17)

T Tanaka (appointed 01/04/16)

T Hirano (appointed 01/04/17)

H Hanada (resigned 01/04/16)

N. Iwashita is the Managing Director and Chief Executive Officer, with responsibility for the Company’s

regional operations. He is supported by T Tanaka, Director and Chief Financial & Administrative Officer,

and four other Directors, T Hirano, J Kakizoe, H Miyazawa and H Urata.

RESULTS AND DIVIDENDS

The Company’s profit for the year ended 31 March 2017 after taxation, amounted to €13,940,000 (2016 €6,879,000). The directors do not recommend the payment of a dividend (2016 - €nil).

FUTURE DEVELOPMENTS

Management’s primary focus remains on the long-term prosperity of the Company and wider group, their

employees, and Marubeni’s trading partners, so the main performance indicator over time is shown by the

growth in net assets. For the year ended 31 March 2017 this growth amounted to €2,098,000 representing

an increase of 1% in the net worth of the Company for the year. The directors have consistently

demonstrated their commitment to the long-term growth of the Company by reinvesting the annual

retained profits in the Company, rather than declaring dividends to the Company’s parent. In line with the

group’s new medium-term management plan “Global Challenge 2018”, the Company intends to continue

operating and seeking growth in its established areas of business, while also consolidating recent equity

acquisitions to contribute to increased profitability in the future. Group management has also expressed an

intention to maintain a strong balance sheet by improving the quality of assets retained in the business,

and by ensuring the generation of positive free cash flows from its trading and investing operations.

GOING CONCERN

The Company’s business includes long-term relationships with many customers and suppliers across

different geographic areas and industries. Having reviewed the Company’s operations, its financial

position, liquid resources and borrowing facilities, together with the continuing profitable performance of

its parent company and the financial strength of its own balance sheet, the directors believe that the

Company has adequate resources to continue as a going concern for the foreseeable future, despite some

continuing uncertainties in the economic environment. For this reason, they continue to adopt the going

concern basis of accounting in preparing the annual financial statements. In addition, note 1 to the

financial statements includes the Company’s policies and processes for managing its liquidity, credit and

other financial risks, which the directors believe contribute to the Company’s ability to continue as a

going concern.

Marubeni Europe plc

DIRECTORS’ REPORT (CONTINUED)

6

DISABLED EMPLOYEES

The Company has a policy of giving full consideration to employment applications from disabled persons

where the candidate’s particular aptitudes and abilities are consistent with adequately meeting the

requirements of the job. Where existing employees become disabled, it is the Company’s policy to

provide continuing employment wherever practicable in the same or an alternative position and to provide

appropriate training to achieve this aim.

EMPLOYEE INVOLVEMENT

It is the Company’s policy to seek opportunities to inform and involve its staff in all matters relating to its

operations, encouraged standards of conduct, and strategic goals. During the year the Company’s parent

continued its commitment to disseminate information throughout the worldwide group by means of

frequent publication of emails, press releases, and opportunities for cultural and social involvement.

Messages from the group’s Chief Executive are distributed to all staff, together with an open channel for

reply, commentary or suggestions. Employees may participate directly in the success of the business

through the Company’s incentive-based performance evaluation system.

DIRECTORS’ QUALIFYING THIRD PARTY INDEMNITY PROVISIONS

The Company has arranged directors’ and officers’ liability insurance for all of its directors against

liability in respect of proceedings brought by third parties, subject to the conditions set out in the

Companies Act 2006. There is no qualifying third party indemnity provision in force either during the

year or as at the date of approving the directors’ report.

CHARITABLE CONTRIBUTIONS

Charitable contributions to various organisations totalling €14,316 were made during the year (2016 -

€33,627).

DISCLOSURE OF INFORMATION TO THE AUDITORS

So far as each person who was a director at the date of approving this report is aware, there is no relevant

audit information, being information needed by the auditor in connection with preparing its report, of

which the auditor is unaware. Having made enquiries of fellow directors, each director has taken all the

steps that he/she is obliged to take as a director in order to make himself/herself aware of any relevant

audit information and to establish that the auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of s.418 of the

Companies Act 2006.

AUDITORS Ernst & Young LLP have indicated their willingness to be reappointed for another term and a resolution to

re-appoint them will be proposed at the Annual General Meeting.

By order of the board

M Hammill

Secretary

28 June 2017

Marubeni Europe plc

STATEMENT OF THE DIRECTORS’ RESPONSIBILITIES

7

The directors are responsible for preparing the Strategic Report, Directors’ Report and the financial

statements in accordance with applicable UK law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law

the directors have elected to prepare the financial statements in accordance with United Kingdom

Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).

Under company law, the directors must not approve the financial statements unless they are satisfied that

they give a true and fair view of the state of affairs of the company and the profit or loss for that period.

In preparing those financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable UK Accounting Standards have been followed, subject to any material

departures disclosed and explained in the financial statements; and

• prepare the financial statements on a going concern bases, unless they consider that to be

inappropriate.

The directors are responsible for keeping adequate accounting records that are sufficient to show and

explain the company’s transactions and disclose with reasonable accuracy at any time the financial

position of the company and enable them to ensure that the financial statements comply with the

Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for

taking reasonable steps for the prevention and detection of fraud and other irregularities.

8

INDEPENDENT AUDITOR’S REPORT

to the members of Marubeni Europe plc

We have audited the financial statements of Marubeni Europe plc for the year ended 31 March 2017

which comprise the income statement, statement of comprehensive income, the statement of changes in

equity, the balance sheet and the related notes 1 to 26. The financial reporting framework that has been

applied in their preparation is applicable law and United Kingdom Accounting Standards (United

Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 101

‘Reduced Disclosure Framework’.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16

of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s

members those matters we are required to state to them in an auditor’s report and for no other purpose. To

the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the

company and the company’s members as a body, for our audit work, for this report, or for the opinions we

have formed.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITOR

As explained more fully in the Directors’ Responsibilities Statement set out on page 7, the directors are

responsible for the preparation of the financial statements and for being satisfied that they give a true and

fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance

with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us

to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS

An audit involves obtaining evidence about the amounts and disclosures in the financial statements

sufficient to give reasonable assurance that the financial statements are free from material misstatement,

whether caused by fraud or error. This includes an assessment of: whether the accounting policies are

appropriate to the company’s circumstances and have been consistently applied and adequately disclosed;

the reasonableness of significant accounting estimates made by the directors; and the overall presentation

of the financial statements. In addition, we read all the financial and non-financial information in the

Report and Financial Statements to identify material inconsistencies with the audited financial statements.

If we become aware of any apparent material misstatements or inconsistencies we consider the

implications for our report.

OPINION ON FINANCIAL STATEMENTS

In our opinion the financial statements:

• give a true and fair view of the state of the company’s affairs as at 31 March 2017 and of its profit

for the year then ended;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting

Practice, including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006

In our opinion

• the part of the Directors’ Remuneration report to be audited has been properly prepared in

accordance with the Companies Act 2006; and

• the information given in the Strategic Report and Directors’ Report for the financial year for which

the financial statements are prepared is consistent with the financial statements.

9

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us

to report to you if, in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audit have not been

received from branches not visited by us; or

• the financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Eamonn McGrath (Senior Statutory Auditor)

for and on behalf of Ernst & Young LLP, (Statutory Auditor)

London

28 June 2017

Marubeni Europe plc

INCOME STATEMENT for the year ended 31 March 2017

10

Year Year

ended ended

31.03.2017 31.03.2016

Notes €000 €000

Turnover 2 535,627 480,566 Cost of sales (482,000) (438,770)

—————— ——————

Gross profit 53,627 41,796

—————— ——————

Administrative expenses (42,900) (38,858) Other operating income 1,354 1,243 Other operating expense (917) (437) Impairment of investments - (325) Interest receivable and similar income 7 7,690 6,518 Interest payable and similar cost 8 (1,299) (1,664)

—————— ——————

Operating profit 3 17,555 8,273

—————— ——————

Profit/ (Loss) on disposal of property, plant and equipment 11 (2) Loss on disposal of fixed asset investments (182) (73)

—————— ——————

Profit on ordinary activities before taxation 17,384 8,198

—————— ——————

Income taxes 9 (3,444) (1,319)

—————— ——————

Profit for the year after taxation 13,940 6,879

—————— ——————

Revenue and operating profit is derived entirely from continuing operations.

All profit is attributable to the owners of the Company, as there is no non-controlling interest.

Marubeni Europe plc

STATEMENT OF OTHER COMPREHENSIVE INCOME for the year ended 31 March 2017

11

Year Year

ended ended

31.03.2017 31.03.2016

Notes €000 €000

Profit for the year 13,940 6,879 Other comprehensive income Net loss on available-for-sale financial assets 12 (9,259) (1,387) Net movement on cash flow hedges 950 (3,061) Tax on net movement on cash flow hedges 9 (157) 794

Profit/(Loss) on defined benefit pension plans 24 (4,056) 189

Tax on defined benefit pension plans 9 680 1,526 ––––––––––– –––––––––––

Other comprehensive loss for the year (11,842) (1,939)

––––––––––– –––––––––––

Total comprehensive income for the year 2,098 4,940

––––––––––– –––––––––––

Total comprehensive income for the year is attributable to the owners of the Company, as there is no non-

controlling interest.

Marubeni Europe plc

STATEMENT OF CHANGES IN EQUITY for the year ended 31 March 2017

12

Available Cash flow Share Share for-sale hedge Retained Other capital premium reserve reserve earnings reserve Total €000 €000 €000 €000 €000 €000 €000

At 1 April 2015 85,243 53,804 23,679 2,001 52,642 93 217,462

Profit for the year - - - - 6,879 - 6,879

Other comprehensive income - - (1,387) (2,267) 1,715 - (1,939)

—————— —————— —————— —————— —————— —————— ———————

At 31 March 2016 85,243 53,804 22,292 (266) 61,236 93 222,402

—————— —————— —————— —————— —————— —————— ———————

At 1 April 2016 85,243 53,804 22,292 (266) 61,236 93 222,402

Profit for the year - - - - 13,940 - 13,940

Other comprehensive income - - (9,259) 793 (3,376) - (11,842)

—————— —————— —————— —————— —————— —————— ———————

At 31 March 2017 85,243 53,804 13,033 527 71,800 93 224,500

—————— —————— —————— —————— —————— —————— ———————

In the opinion of the Directors, the other reserve is non-distributable.

Marubeni Europe plc

BALANCE SHEET as at 31 March 2017

13

31 March 31 March

2017 2016

Notes €000 €000

Fixed Assets

Intangible fixed assets 11 1,317 53

Tangible fixed assets 10 3,732 2,626

Investments 12 115,006 137,771

Deferred tax assets 9 2,851 2,460 —————— ——————

122,906 142,910 —————— ——————

Current assets

Stocks 14 46,745 46,084

Loans receivable - due within one year 15 3,082 26,032

- due after one year 10,134 9,257

Trade debtors 96,505 83,515

Amounts owed by associates 1,823 2,193

Amounts owed by parent company 12,281 29,346

Other debtors – due within one year 16 41,900 12,251

Prepayments and accrued income 1,194 1,313

Investments current - due within one year 13 2,231 424

Cash at bank and in hand 28,020 16,114 —————— ——————

243,915 226,529 —————— ——————

Creditors: amounts falling due within one year

Bank loans 19 1,241 1,413

Trade creditors 18 44,957 47,091

Amounts owed to associates - 166

Amounts owed to parent company 58,367 51,393

Income tax payable 9 2,366 1,544

Other creditors including

tax and social security 17 6,259 20,016

Financial instruments 19 697 1,714

Accruals and deferred income 8,421 6,716 —————— ——————

122,308 130,053 —————— ——————

Net current assets 121,607 96,476

Marubeni Europe plc

BALANCE SHEET (CONTINUED) as at 31 March 2017

14

Creditors: amounts falling due after more than one year

31 March 31 March

2017 2016

Notes €000 €000

Bank loans 19 234 1,198 —————— ——————

234 1,198 —————— ——————

Provisions for liabilities 22 869 795 Pension liabilities 24 18,910 14,991 —————— ——————

19,779 15,786 —————— ——————

Net assets 224,500 222,402 —————— ——————

31 March 31 March

2017 2016

Notes €000 €000

Capital and reserves

Equity Issued capital 20 85,243 85,243 Share premium 53,804 53,804 Available for sale reserve 13,033 22,292 Cash flow hedge reserve 527 (266) Other capital reserves 93 93

Retained earnings 71,800 61,236 —————— ——————

Total Equity 224,500 222,402 —————— ——————

These financial statements were approved by the board of directors on 28 June 2017 and were signed on

its behalf by:

T Tanaka Director

Marubeni Europe plc

NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2017

15

1. ACCOUNTING POLICIES

Corporate information

The financial statements of the Company for the year ended 31 March 2017 were authorised for issue in

accordance with a resolution of the directors on 28 June 2017.

The Company is a public limited company incorporated and domiciled in England with branches in four

European countries. The registered office is located at 95 Gresham Street, London EC2V 7AB.

The principal activities of the Company are described in the Strategic Report. Information on its ultimate

parent is presented in note 26.

Basis of preparation

These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced

Disclosure Framework (FRS 101). The Company’s financial statements are presented in Euros and all

values are rounded to the nearest thousand (€000) except when otherwise indicated. The financial

statements have also been prepared in accordance with the Companies Act 2006.

The financial statements have been prepared on a historical cost basis, except for derivative financial

instruments and available-for-sale financial assets that have been measured at fair value. The carrying

values of recognised assets and liabilities that are designated as hedged items in fair value hedges that

would otherwise be carried at amortised cost are adjusted to record changes in the fair values attributable

to the risks that are being hedged in effective hedge relationships.

The Company has taken advantage of the following disclosure exemptions under FRS 101:

a) the requirements of paragraphs 62, B64(d), B64(e), B64(g), B64(h), B64(j) to B64(m),

B64(n)(ii), B64 (o)(ii), B64(p), B64(q)(ii), B66 and B67of IFRS 3 Business Combinations.

Equivalent disclosures are included in the consolidated financial statements of Marubeni

Corporation in which the entity is consolidated;

b) the requirements of paragraph 33 (c) of IFRS 5 Non-current Assets Held for Sale and

Discontinued Operations;

c) the requirements of IFRS 7 Financial Instruments: Disclosures;

d) the requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement;

e) the requirement in paragraph 38 of IAS 1 ‘Presentation of Financial Statements’ to present

comparative information in respect of: (i) paragraph 79(a) (iv) of IAS 1, (ii) paragraph 73(e) of

IAS 16 Property Plant and Equipment (iii) paragraph 118 (e) of IAS 38 Intangibles Assets, (iv)

paragraphs 76 and 79(d) of IAS 40Investment Property and (v) paragraph 50 of IAS

41Agriculture;

f) the requirements of paragraphs 10(d), 10(f), 16, 38A to 38D, 40A, 40B, 40C and 40D,111 and

134 to 136 of IAS 1 Presentation of Financial Statements;

g) the requirements of IAS 7 Statement of Cash Flows; h) the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in

Accounting Estimates and Errors;

i) the requirements of paragraph 17 and 18A of IAS 24 Related Party Disclosures;

j) the requirements in IAS 24 Related Party Disclosures to disclose related party transactions

entered into between two or more members of a group, provided that any subsidiary which is a

party to the transaction is wholly owned by such a member ; and

k) the requirements of paragraphs 130(f)(ii), 130(f)(iii),134(d)-134(f) and 135(c) to135(e) of IAS 36

Impairment of Assets.

Marubeni Europe plc


16

1. ACCOUNTING POLICIES (continued)

Basis of preparation (continued)

Separate financial statements

The Company has taken advantage of the exemption clauses within the Companies Act 2006 s401 not to

prepare consolidated accounts. The financial statements present information about the Company as an

individual entity and not about its group. The ultimate parent company of Marubeni Europe plc is

Marubeni Corporation, a company incorporated in Japan, which prepares consolidated accounts in

accordance with IFRS.

The accounting policies which follow set out those policies which apply in preparing the financial

statements for the year ended 31 March 2017. The financial statements have been prepared on a going

concern basis, as set out in the directors’ report on page 5.

Judgements and key sources of estimation uncertainty

The preparation of financial statements requires management to make judgements, estimates and

assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the

amounts reported for revenues and expenses during the year. However, the nature of estimation means

that actual outcomes could differ from those estimates.

a) Taxation

Management judgement is required to determine the amount of deferred tax assets that can be

recognised, based upon the likely timing and level of future taxable profits together with an

assessment of the effect of future tax planning strategies. Further details are contained in note 9.

b) Pension and other post-employment benefits The cost of defined benefit pension plans and other post-employment benefits are determined

using actuarial valuations. The actuarial valuations involve making assumptions about discount

rates, future salary increases, mortality rates and future pension increases. Due to the complexity

of the valuations, the underlying assumptions and the long term nature of these plans, such

estimates are subject to significant uncertainty. In determining the appropriate discount rate,

management considers the interest rates of corporate bonds in the respective currency with at

least AA rating, with extrapolated maturities corresponding to the expected duration of the

defined benefit obligation. The underlying bonds are further reviewed for quality, and those

having excessive credit spreads are removed from the population of bonds on which the discount

rate is based, on the basis that they do not represent high quality bonds. The mortality rates are

based on publicly available mortality tables for the specific country. Future salary increases and

pension increases are based on expected future inflation rates for the respective country. Further

details are given in note 24.

c) Fair value of unquoted investments The unquoted equity investments have been fair valued based on the net asset value of the

underlying investment where there is no externally observable market data available. The fair

value of the unquoted equity instruments at 31 March 2017 was €115,006,000 (31 March 2016 -

€123,504,000).

Marubeni Europe plc


17


Foreign currency translation

The Company’s financial statements are presented in Euros, which is also the Company’s functional

currency. The Euro represents the currency of the primary economic environment in which the Company

operates. Transactions in foreign currencies are initially recorded in the entity’s functional currency by

applying the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities

denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the

balance sheet date. All differences are taken to the income statement. Non-monetary items that are

measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the

dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are

translated using the exchange rates at the date when the fair value was determined.

Intangible assets

Intangible assets with finite lives are amortised over their useful economic life and assessed for

impairment whenever there is an indication that the intangible asset may be impaired. The amortisation

period and the amortisation method are reviewed at least at each financial year end. Changes in the

expected useful life or the expected pattern of consumption of future economic benefits embodied in the

asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as

changes in accounting estimates. Gains or losses arising from de-recognition of an intangible asset are

measured as the difference between the net disposal proceeds and the carrying amount of the asset and are

recognised in the income statement when the asset is derecognised.

Investments

Investments in subsidiaries, associates and joint ventures are held at historical cost less any applicable

provision for impairment.

Impairment of non-financial assets

The Company assesses at each reporting date whether there is an indication that an asset may be impaired.

If any such indication exists, or when annual impairment testing for an asset is required, the Company

makes an estimate of the asset’s recoverable amount in order to determine the extent of the impairment

loss. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less

costs to sell and its value in use and is determined for an individual asset, unless the asset does not

generate cash inflows that are largely independent of those from other assets or groups of assets. Where

the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is

written down to its recoverable amount. Impairment losses on continuing operations are recognised in the

income statement in those expense categories consistent with the function of the impaired asset. For assets

where an impairment loss subsequently reverses, the carrying amount of the asset or cash generating unit

is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that

would have been determined, net of depreciation, had no impairment losses been recognised for the asset

or cash generating unit in prior years. A reversal of impairment loss is recognised immediately in the

income statement, unless the asset is carried at a revalued amount when it is treated as a revaluation

increase.

Marubeni Europe plc


18


Tangible Fixed Assets - Property, plant and equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation and/or accumulated

impairment losses, if any. Such cost includes the cost of replacing component parts of the property, plant

and equipment and borrowing costs for long-term construction projects if the recognition criteria are met.

When significant parts of property, plant and equipment are required to be replaced at intervals, the

Company derecognises the replaced part, and recognises the new part with its own associated useful life

and depreciation. Likewise, when a major inspection is performed, its cost is recognised in the carrying

amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other

repair and maintenance costs are recognised in the income statement as incurred. The present value of the

expected cost for the decommissioning of the asset after its use is included in the cost of the respective

asset if the recognition criteria for a provision are met.

Depreciation is provided on all tangible fixed assets, at rates calculated to write off the cost, less estimated

residual value, of each asset over its expected useful life as follows:

Depreciation rate (%) or period Method

Leasehold land over the lease term,

and buildings up to a maximum of 40 years Straight line, zero residual value

Motor vehicles over 4 to 6 years Straight line, zero residual value

Fixtures and fittings over 5 to 10 years Straight line, zero residual value

Computer equipment over 2 to 9 years Straight line, zero residual value

An item of property, plant and equipment and any significant part initially recognised is derecognised

upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss

arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and

the carrying amount of the asset) is included in the income statement when the asset is derecognised.

The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year

end and adjusted prospectively, if appropriate. The carrying values of tangible fixed assets are reviewed

for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.

Assets in disposal groups classified as held for sale

Non-current assets and disposal groups are classified as held for sale only if available for immediate sale

in their present condition, and a sale is highly probable and expected to be completed within one year

from the date of classification. Such assets are measured at the lower of carrying amount and fair value

less costs to sell and are not depreciated or amortised.

Leases:

Company as a lessee

Assets held under finance leases, which transfer to the Company substantially all the risks and benefits

incidental to ownership of the leased item, are capitalised at the inception of the lease, with a

corresponding liability being recognised for the lower of the fair value of the leased asset and the present

value of the minimum lease payments. Lease payments are apportioned between the reduction of the lease

liability and finance charges in the income statement so as to achieve a constant rate of interest on the

remaining balance of the liability. Assets held under finance leases are depreciated over the shorter of the

estimated useful life of the asset and the lease term. Leases where the lessor retains a significant portion of

the risks and benefits of ownership of the asset are classified as operating leases and rentals payable are

charged in the income statement on a straight line basis over the lease term.

Marubeni Europe plc


19


Leases (continued)

Company as a lessor

Assets leased out under operating leases are included in property, plant and equipment and depreciated

over their estimated useful lives. Rental income, including the effect of lease incentives, is recognised on a

straight line basis over the lease term. Where the Company transfers substantially all the risks and benefits

of ownership of the asset, the arrangement is classified as a finance lease and a receivable is recognised

for the initial direct costs of the lease and the present value of the minimum lease payments. As payments

fall due, finance income is recognised in the income statement so as to achieve a constant rate of return on

the remaining net investment in the lease.

Financial assets

Initial recognition and measurement

Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or

loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as

derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company

determines the classification of its financial assets at initial recognition. All financial assets are recognised

initially at fair value plus, in the case of investments not at fair value through profit or loss, directly

attributable transaction costs. Purchases or sales of financial assets that require delivery of assets within a

time frame established by regulation or convention in the marketplace (regular way trades) are recognised

on the trade date i.e., the date that the Company commits to purchase or sell the asset. The Company’s

financial assets include cash and short-term deposits, trade and other receivables, loan notes, quoted and

unquoted financial instruments, and derivative financial instruments.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial

assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified

as held for trading if they are acquired for the purpose of selling in the near term.

This category includes derivative financial instruments entered into by the Company that are not

designated as hedging instruments in hedge relationships as defined by IAS 39. Derivatives, including

separated embedded derivatives are also classified as held for trading unless they are designated as

effective hedging instruments. Financial assets at fair value through profit and loss are carried in the

balance sheet at fair value with changes in fair value recognised in other operating income or other

operating expense in the income statement.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not

quoted in an active market. Such assets are carried at amortised cost using the effective interest rate (EIR)

method, less impairment. Amortised cost is calculated by taking into account any discount or premium on

acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in

finance revenue in the income statement. The losses arising from impairment are recognised in the income

statement in other operating expenses.

Available-for-sale financial assets

Available-for-sale financial assets include equity securities. Equity investments classified as available-for

sale are those which are neither classified as held for trading nor designated at fair value though profit or

loss.

Marubeni Europe plc


20


Available-for-sale financial assets (continued)

After initial measurement, available-for-sale financial investments are subsequently measured at fair value

with unrealised gains or losses recognised as other comprehensive income in the unrealised gains and

losses reserve. When the investment is derecognised, the cumulative gain or loss is recognised in other

operating income, or determined to be impaired, at which time the cumulative loss is recognised in the

income statement in other operating expenses and removed from the unrealised gains and losses reserve.

The Company evaluates its available-for-sale financial assets and whether the ability and intent to sell

them in the near term is still appropriate. When the Company is unable to trade these financial assets due

to inactive markets and management’s intent significantly changes to do so in the foreseeable future, the

Company may elect to reclassify these financial assets in rare circumstances. Reclassification to loans and

receivables is permitted when the financial asset meets the definition of loans and receivables and when

the Company has the intent and ability to hold these assets for the foreseeable future or until maturity.

Financial liabilities

Initial recognition and measurement

Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through

profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective

hedge, as appropriate. The Company determines the classification of its financial liabilities at initial

recognition. All financial liabilities are recognised initially at fair value and in the case of loans and

borrowings, plus directly attributable transaction costs.

Subsequent measurement

The measurement of financial liabilities depends on their classification as follows:

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and

financial liabilities designated upon initial recognition as at fair value through profit or loss.

Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the

near term. Derivatives, including separated embedded derivatives are also classified as held for trading

unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading

are recognised in profit or loss.

Interest bearing loans and borrowings Obligations for loans and borrowings are recognised when the Company becomes party to the related

contracts and are measured initially at the fair value of consideration received less directly attributable

transaction costs. Gains and losses arising on the repurchase, settlement or otherwise cancellation of

liabilities are recognised respectively in finance revenue and finance cost.

De-recognition of financial liabilities

A liability is generally derecognised when the contract that gives rise to it is settled, sold, cancelled or

expires. Where an existing financial liability is replaced by another from the same lender on substantially

different terms, or the terms of an existing liability are substantially modified, such an exchange or

modification is treated as a de-recognition of the original liability and the recognition of a new liability,

such that the difference in the respective carrying amounts together with any costs or fees incurred are

recognised in profit or loss.

Marubeni Europe plc


21


Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the consolidated balance

sheet if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there

is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Fair values The fair value of financial instruments that are traded in active markets at the reporting date is determined

by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price

for short positions), without any deduction for transaction costs. For financial instruments not traded in an

active market, the fair value is determined using appropriate valuation techniques. Such techniques may

include using recent arm’s length market transactions; reference to the current fair value of another

instrument that is substantially the same; discounted cash flow analysis or other valuation models.

Derivative financial instruments and hedging

The Company uses derivative financial instruments such as forward currency contracts and interest rate

swaps to hedge its risks associated with foreign currency and interest rate fluctuations. Derivative

financial instruments are initially recognised at fair value on the date on which a derivative contract is

entered into and are subsequently re-measured at fair value. Derivatives are carried as assets when the fair

value is positive and as liabilities when the fair value is negative. The fair value of forward currency

contracts is calculated by reference to current forward exchange rates for contracts with similar maturity

profiles. The fair value of interest rate swap contracts is determined by reference to market values for

similar instruments. For those derivatives designated as hedges and for which hedge accounting is

desired, the hedging relationship is formally designated and documented at its inception. This

documentation identifies the risk management objective and strategy for undertaking the hedge, the

hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how

effectiveness will be measured throughout its duration. Such hedges are expected at inception to be highly

effective in offsetting changes in fair value or cash flows and are assessed on an ongoing basis to

determine that they actually have been highly effective throughout the reporting period for which they

were designated.

For the purpose of hedge accounting, hedges are classified as:

• fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or

liability or an unrecognised firm commitment; or

• cash flow hedges when hedging exposure to variability in cash flows that is either attributable to

a particular risk associated with a recognised asset or liability or a highly probable forecast

transaction;

Any gains or losses arising from changes in the fair value of derivatives that do not qualify for hedge

accounting are taken to the income statement. The treatment of gains and losses arising from revaluing

derivatives designated as hedging instruments depends on the nature of the hedging relationship, as

follows:

Fair value hedges

For fair value hedges, the carrying amount of the hedged item is adjusted for gains and losses attributable

to the risk being hedged; the derivative is re-measured at fair value and gains and losses from both are

taken to profit or loss. For hedged items carried at amortised cost, the adjustment is amortised through the

income statement such that it is fully amortised by maturity. When an unrecognised firm commitment is

designated as a hedged item, this gives rise to an asset or liability in the balance sheet, representing the

cumulative change in the fair value of the firm commitment attributable to the hedged risk.

Marubeni Europe plc


22


Derivative financial instruments and hedging (continued)

The Company discontinues fair value hedge accounting if the hedging instrument expires or is sold,

terminated or exercised, the hedge no longer meets the criteria for hedge accounting or the Company

revokes the designation. The Company used interest rate swaps during the year that were used as a hedge

for the exposure of changes in the fair value of several fixed rate loans receivable although none were

outstanding at the end of the year.

The Company’s financial instruments, other than short term debtors and creditors and derivatives,

comprise fixed asset investments, bank loans, other loans to and from related and unrelated parties, notes,

cash, time deposits and fixed asset investments (excluding investments in associates). The main purpose

of these financial instruments is to raise and manage finance for the Company’s trading operations. The

Company also makes trade investments in other group companies at the request of Marubeni Corporation.

The Company also enters into derivative transactions (principally interest rate swaps, currency swaps,

forward currency exchange contracts and commodity futures contracts). The purpose of these transactions

is to manage the interest rate, currency and commodity price risks arising from the Company’s operations

and its sources of finance.

The Company participates in a cash pooling scheme along with selected European based fellow

subsidiaries of Marubeni Corporation in order to optimise net interest earned on cash reserves. It is the

Company’s policy not to engage in trading in financial instruments. Derivative financial instruments are

solely used for hedging purposes. The main risks arising from the Company’s financial instruments are

interest rate risk, liquidity risk, foreign currency risk, credit risk and commodity market price risk. The

board considers these risks, and agrees policies for managing each of them, in order to ensure the long-

term stability of the Company’s operations.

Interest Rate Risk

The Company borrows in various currencies, normally in order to meet specific lending or investment

opportunities, at predominantly floating rates of interest, except where fixed rate assets are to be funded.

Where necessary the Company then uses interest rate swaps to generate the desired interest profile and to

manage the group’s exposure to interest rate fluctuations. The Company’s policy continues to be to

maintain a broadly matched profile between fixed and floating interest rate exposures.

Liquidity Risk

The Company’s objective is to maintain a balance between continuity of funding and flexibility through

the use of bank loans, commercial paper and group funding, at the same time seeking to obtain funding at

favourable borrowing rates. Details of the Company’s long-term debt are summarised in notes 17 and 19.

Foreign Currency Risk

As a result of the significant international transactions in US dollars, Japanese yen and other foreign

currencies, and the fact that the parent’s functional currency is the Euro, the Company’s balance sheet can

be significantly affected by movements in exchange rates. However, the Company takes steps to reduce

the potential for such effects by managing its currency exposures through the use of spot and forward

currency exchange contracts, by maintaining asset and liability exposures in matched currencies and by

the use of currency swap contracts were appropriate.

Marubeni Europe plc


23


Stocks Stocks are stated at the lower of cost and net realisable value. Cost includes all costs incurred in bringing

each product to its present location and condition, as follows:

Raw materials and consumables - purchase cost on a first-in, first-out basis

Cost of stock includes the transfer from equity of gains and losses on qualifying cash flow hedges in

respect of the purchase of materials. Net realisable value is based on estimated selling price less any

further costs expected to be incurred to completion and disposal.

Trade and other debtors Trade debtors, which generally have 30-90 day terms, are recognised and carried at the lower of their

original invoiced value and recoverable amount. Where the time value of money is material, receivables

are carried at amortised cost. Provision is made when there is objective evidence that the Company will

not be able to recover balances in full. Balances are written off when the probability of recovery is

assessed as being remote.

Cash at bank and in hand

Cash and short term deposits in the balance sheet comprise cash at banks and in hand.

Income taxes

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the

taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the balance

sheet date.

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and

liabilities and their carrying amounts in the financial statements, with the following exceptions:

Deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be

available against which the deductible temporary differences, carried forward tax credits or tax losses can

be utilised.

Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are

expected to apply when the related asset is realised or liability is settled, based on tax rates and laws

enacted or substantively enacted at the balance sheet date.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date. Deferred

income tax assets and liabilities are offset, only if a legal enforcement right exists to set off current tax

assets against current tax liabilities, the deferred income taxes relate to the same taxation authority and

that authority permits the Company to make a single net payment.

Income tax is charged or credited to other comprehensive income if it relates to items that are charged or

credited to other comprehensive income. Similarly, income tax is charged or credited directly to equity if

it relates to items that are credited or charged directly to equity. Otherwise income tax is recognised in the

income statement.

Marubeni Europe plc


24


Pensions

The Company, in conjunction with other fellow subsidiary undertakings, operates a defined benefit

pension scheme in the UK, which requires contributions to be made to a separately administered fund.

Any increase in the present value of the liabilities expected to arise from employee service in the period is

charged against operating profit and included as part of staff costs. The net interest cost on the scheme

assets less liabilities is shown as a net amount of other finance costs included with interest payable and

similar costs. Actuarial gains and losses are recognised immediately in other comprehensive income.

Pension scheme assets are measured using market values and liabilities are measured on an actuarial basis

using the projected unit method. Actuarial valuations are obtained at least triennially and are updated at

each balance sheet date. The resulting defined benefit asset or liability is presented within provisions for

liabilities on the face of the balance sheet. The Company operates unfunded defined benefit pension

arrangements in overseas branches which are accounted for in the same way as the UK scheme. In

addition to this the Company operates a defined contribution plan in the UK; the Company pays

contributions to a privately administered pension insurance plan on a mandatory and contractual basis.

The Company has no further payment obligations once the contributions have been paid. The

contributions are recognised as employee benefit expense when they are due.

Exceptional items

The Company presents as exceptional items those material items of income and expense which, because

of the nature and expected infrequency of the events giving rise to them, merit separate presentation to

allow shareholders to understand better the elements of financial performance in the year, so as to

facilitate comparison with prior periods and to assess better trends in financial performance.

Revenue recognition

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Company

and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration

received, excluding discounts, rebates, value added tax and other sales taxes. The Company assesses its

revenue arrangements against specific criteria in order to determine if it is acting as principal or an agent.

Where the Company is deemed to be acting as principal, the gross sales amount is recorded as revenue.

Where the Company is deemed to be acting as an agent the net amount is recorded as revenue.

The following criteria must also be met before revenue is recognised:

Sale of goods

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the

goods have passed to the buyer.

Rendering of services

Revenue from the provision of services is recognised by reference to the stage of completion.

Interest income

Revenue is recognised as interest accrues using the effective interest method. The effective interest rate is

the rate that exactly discounts estimated future cash receipts through the expected life of the financial

instrument to its net carrying amount.

Dividends

Revenue is recognised when the Company’s right to receive payment is established.

Marubeni Europe plc


25

2. TURNOVER

Turnover represents the invoiced amount of goods sold and accruals for services provided which fall

within the Company’s ordinary activities, all of which are continuing.

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Turnover comprises:

Principal sales 504,081 460,757 Other sales and commissions 31,546 19,809

––––––––––– –––––––––––

535,627 480,566

––––––––––– –––––––––––

Marubeni Europe plc purchases, distributes and markets a wide variety of chemical, forest and agricultural

products, consumer goods and other commodities, as well as activities in the power, plant, energy,

transportation and industrial machinery sectors.

The Company operates on a worldwide basis and derives its income from these trading service activities.

The directors are of the opinion that its total general trading business constitutes one class of activity.

Accordingly its turnover and pre-tax result have not been broken down into classes of activity.

3. OPERATING PROFIT

This is stated after charging:

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Depreciation expense (note 10) 365 537 Net gain on foreign currency exchange differences (702) (654) Operating lease rentals - land and buildings 2,777 2,750 - others 85 88 Cost of stocks recognised as an expense (included in cost of sales)

and write-down of stocks to net realisable value 42 43

––––––––––– ––––––––––

4. AUDITOR’S REMUNERATION

The Company paid the following amounts to its auditor in respect of the audit of the financial statements:

The remuneration of the auditor is analysed as follows:

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Audit of the financial statements 283 319 - other services ——— ———

Marubeni Europe plc


26

4. AUDITOR’S REMUNERATION (continued)

The Company has taken advantage of the option not to disclose amounts paid for non-audit services as these are disclosed in the group accounts of its parent Marubeni Corporation.

5. DIRECTORS’ REMUNERATION

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Aggregate remuneration in respect of qualifying services 2,340 2,023

––––––––––– –––––––––––

The amounts in respect of the highest paid director were as follows:

Aggregate remuneration 885 902

––––––––––– –––––––––––

The directors’ pension arrangements are disclosed in note 24.

6. STAFF COSTS

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Wages and salaries 25,008 21,542 Social security costs 2,199 1,948 Other pension costs 988 1,573 ––––––––––– ––––––––––– 28,195 25,063

––––––––––– –––––––––––

Included in other pension costs are €646,000 (2016 - €1,206,000) in respect of the UK funded defined benefit scheme as described in note 24.

The average monthly number of employees during the year was made up as follows:

Year Year

ended ended

31.03.2017 31.03.2016

No. No.

Trading 98 92 Administration 62 60 –––––––––– ––––––––––– 160 152

––––––––––– –––––––––––

In addition, 50 (2016 - 45) personnel employed by Marubeni Corporation were seconded to work for the

Company during the year. The salary costs of these personnel, which are included in the above figures, are

borne by Marubeni Europe plc.

Marubeni Europe plc


27

7. INTEREST RECEIVABLE AND SIMILAR INCOME

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Loans receivable and other debtors 82 49 Amounts receivable from group undertakings 961 1,623 ––––––––––– ––––––––––– 1,043 1,672 Income from shares in group undertakings 5,927 4,157 Income from unlisted trade investments 718 362

Bank deposit interest 2 327 ––––––––––– ––––––––––– 7,690 6,518

––––––––––– –––––––––––

8. INTEREST PAYABLE AND SIMILAR CHARGES

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Bank loans and other loans wholly repayable within five years 846 1,180 Amounts payable to group undertakings 171 207 Net interest paid on pension scheme 282 277 ––––––––––– ––––––––––– 1,299 1,664

––––––––––– –––––––––––

9. TAXATION

The taxation charge is made up as follows:

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Current tax: UK corporation tax 976 296 Tax (over)/under-provided in prior years (UK) (37) (35)

––––––––––– –––––––––––

939 261 Overseas tax: Overseas corporate taxes 2,254 1,068 Tax (over)/under-provided in prior years (overseas) 239 (22)

––––––––––– –––––––––––

Current tax 3,432 1,307 Deferred tax: Deferred tax – origination and reversal of timing differences 12 12

––––––––––– –––––––––––

3,444 1,319

––––––––––– –––––––––––

Marubeni Europe plc


28

9. TAXATION (continued)

Tax relating to items charged or credited to other comprehensive income:

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Deferred tax: Tax on net movement on cash flow hedges (157) 794 Tax on defined benefit pension plans 680 1,526

––––––––––– –––––––––––

523 2,320

––––––––––– –––––––––––

Factors affecting current tax charge (reconciliation of tax)

The tax assessed on the profit on ordinary activities for the year is higher (2016 - higher) than the standard

rate of corporation tax for the region in which the Company operates of 23.78% (2015 – 24.64%). The

differences are reconciled below:

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Profit on ordinary activities before tax 17,384 8,198 Profit before tax multiplied by relevant rate (1) of corporation tax to ––––––––––– ––––––––––– reflect results of European operations (23.78%) (2016 – 24.64%) 4,134 2,020 Non-taxable losses on sale or impairment provisions of investments 28 80 Non-taxable income, disallowed expenditure, and other differences (932) (737) Net effect of tax (over-)/under-provided in prior years 202 (56) Overseas deferred tax – origination and reversal of timing differences 12 12 ——— ——— Total tax 3,444 1,319

––––––––––– –––––––––––

(1) The relevant tax rate is 23.78% (2016 – 24.64%). This reflects the fact that the Company has

branches across Europe - significantly in Germany, Italy, and France, where profits are taxed at

rates which are higher than the UK rate of Corporation Tax.

Deferred Tax

Deferred tax assets have been recognised in the Balance Sheets in respect of current timing differences for

accounting provisions and on the pension fund liabilities as set out in notes 1 and 24. The year-end

provision is as follows:

31 March 31 March

2017 2016

€000 €000

Deferred tax asset (non-current) on timing differences for accounting provisions (99) 188 on German pension liability 760 676 on UK pension liability 2,190 1,596 ——— ——— 2,851 2,460

––––––––––– –––––––––––

Marubeni Europe plc


29

9. TAXATION (continued)

At the balance sheet date, deferred tax assets relating to carried forward capital losses of €9,800,000 (2016 - €10,600,000) have not been recognised because it is not certain that future capital gains will be available against which the company can utilise these benefits With effect from 1 April 2013, the directors made an election under s.18A of the Corporation Tax Act 2009 to exempt the Company’s overseas permanent establishments from UK taxation. This reduced deferred tax by eliminating certain UK timing differences originating in European branches. The Finance Act 2016 enacted reductions in the rate of UK Corporation Tax from 20% to 19% with effect

from 1 April 2017, and to 17% with effect from 1 April 2020. The recognised UK deferred tax assets

have been calculated to reflect the tax consequences of the manner in which they are expected to be

recovered and at the applicable rate under current legislation.

Marubeni Europe plc


30

10. TANGIBLE FIXED ASSETS

Leasehold Fixtures

land and Motor and Computer

buildings vehicles fittings equipment Total

€000 €000 €000 €000 €000

Cost: At 1 April 2015 3,271 199 1,140 1,082 5,692 Additions - 42 62 144 248 Disposals - (47) (12) (97) (156) ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– At 31 March 2016 and 1 April 2016 3,271 194 1,190 1,129 5,784 Additions 990 77 216 195 1,478 Disposals - (72) (67) (54) (193) ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– At 31 March 2017 4,261 199 1,339 1,270 7,069 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– Depreciation and impairment: At 1 April 2015 866 114 960 843 2,783 Depreciation charged in year 300 28 58 130 516 Removed on disposals - (45) (10) (86) (141) ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– At 31 March 2016 and 1 April 2016 1,166 97 1,008 887 3,158 Depreciation charged in year 219 85 26 35 365 Removed on disposals - (65) (67) (54) (186) ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– At 31 March 2017 1,385 117 967 868 3,337 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– Net book value: At 31 March 2017 2,876 82 372 402 3,732 ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––

At 31 March 2016 2,105 97 182 242 2,626 ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––

At 31 March 2015 2,405 85 180 239 2,909 ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––

Marubeni Europe plc


31

11. INTANGIBLE FIXED ASSETS

Licensed Unpatented Computer Total

rights technology software

€000 €000 €000 €000

Cost: At 1 April 2015 - - 125 125 Additions - - 48 48 Disposals - - (10) (10) ––––––––––– ––––––––––– ––––––––––– ––––––––––– At 31 March 2016 and 1 April 2016 - - 163 163 Additions 820 450 21 1,291 Disposals - - - - ––––––––––– ––––––––––– ––––––––––– ––––––––––– At 31 March 2017 820 450 184 1,454 ––––––––––– ––––––––––– ––––––––––– ––––––––––– Depreciation and impairment: At 1 April 2015 - - 99 99 Provided during the year - - 21 21 Removed on disposal - - (10) (10) ––––––––––– ––––––––––– ––––––––––– ––––––––––– At 31 March 2016 and 1 April 2016 - - 110 110 Provided during the year - - 27 27 Removed on disposal - - - - ––––––––––– ––––––––––– ––––––––––– ––––––––––– At 31 March 2017 - - 137 137 ––––––––––– ––––––––––– ––––––––––– –––––––––––

Net book value: At 31 March 2017 820 450 47 1,317 ––––––––––– ––––––––––– ––––––––––– –––––––––––

At 31 March 2016 - - 53 53 ––––––––––– ––––––––––– ––––––––––– –––––––––––

At 31 March 2015 - - 26 26 ––––––––––– ––––––––––– ––––––––––– –––––––––––

Intangible fixed assets consist of licensed rights (infinite life intangibles), which are reviewed annually for

impairment, unpatented technology (finite life intangibles) that are being amortised over a period of six

years and computer software, which is amortised over three to five years on a straight line, zero residual

value basis and includes purchased software, including associated installation and modification costs.

Marubeni Europe plc


32

12. INVESTMENTS – NON-CURRENT

31 March 31 March

2017 2016

€000 €000

Investments in subsidiaries 32,435 32,450 Investments in associates 8,867 6,789 ––––––––––– ––––––––––– Investments at cost 41,302 39,239 ––––––––––– ––––––––––– Available for sale financial assets -

fair value through other comprehensive income Unlisted equity shares 73,616 98,443 ––––––––––– ––––––––––– Fair value through Profit and Loss unlisted equity investments 88 89 ––––––––––– ––––––––––– Total Investments – non-current 115,006 137,771 ––––––––––– ––––––––––– Available for sale financial assets -

fair value through other comprehensive income €000 April 2015 89,990 Additions 11,909 Disposals (1,996) Permanent impairment (to Profit and Loss)* (73) Other comprehensive income - (Net Loss) on

valuation of available-for-sale financial assets (1,387)

––––––––––– At 31 March 2016 and April 2017 98,443 –––––––––––

Additions 1,684 Disposals (17,252) Other comprehensive income - (Net Loss) on

valuation of available-for-sale financial assets (9,259)

––––––––––– At 31 March 2017 73,616 –––––––––––

*When the fair value of available for sale financial assets is deemed to be a permanent decline in value the

unrealised loss is realised and transferred to Profit and Loss.

Fair value through Profit and Loss unlisted equity investments: €000 At 1 April 2015 90 Net realised loss to profit and loss (1) ––––––––––– At 31 March 2016 and 1 April 2016 89 –––––––––––

Disposals - Net realised loss to profit and loss (1) ––––––––––– At 31 March 2017 88 –––––––––––

Marubeni Europe plc


33

12. INVESTMENTS – NON-CURRENT (continued)

During the year, the liquidation of the subsidiary undertaking, Hadis Export-Import GmbH was completed

resulting in a loss of €14,000, and accounted for the €14,000 reduction to Investments in subsidiaries in

the year. The Gaudi Power Holdings LLC investment was also liquidated and closed in the year resulting

in a gain of €465,000 and accounted for €13,132,000 of the investment disposals reported in the year.

During the prior year the Associate undertaking, I. Marubeni s.r.o. was liquidated resulting in a loss of

€1,000.

The Company holds 20% or more of the equity of the following unlisted companies at 31 March 2017:

Country of Proportion of

Incorporation voting rights

if not and Nature of Accounting

Name of Company United Kingdom Holding shares held business year end

Subsidiary undertakings:

Marubeni Specialty Chemicals

(Europe) GmbH Germany Ordinary shares 100% In liquidation 31 December

Marubeni Deutschland

GmbH Germany Ordinary shares 100% In liquidation 31 December

Associated undertakings:

Marubeni Pulp and Paper Sales

(Europe) GmbH Germany Ordinary shares 40% In liquidation 31 December

EECO Holding Belgium Ordinary shares 33% Cogeneration Plant 31 December

Yokohama Austria GmbH Austria Ordinary shares 27% Tyre distribution 31 December

Marubeni (Hungary) Engineering

and Construction Kft Hungary Ordinary shares 20% Engineering and Construction 31 December

13. INVESTMENTS CURRENT

31 March 31 March

2017 2016

€000 €000

Financial assets – due within one year

Future commodity derivative contracts 1,563 62 Forward currency hedging contracts 668 362 ––––––––––– ––––––––––– 2,231 424 ––––––––––– –––––––––––

The fair value of forward currency exchange contracts were determined using quoted forward exchange

rates matching the maturity of the contracts.

The cash flow hedges of the expected future sales and costs in 2017 were assessed as effective and an

unrealised gain of €793,000 was included within other comprehensive income, net of tax, and net of the

reversal of the unrealised loss of €2,267,000 recognised in the previous year.

Marubeni Europe plc


34

14. STOCKS

31March 31 March

2017 2016

€000 €000

Goods for resale 23,775 31,455 Merchandise in transit 22,970 14,629 ––––––––––– ––––––––––– 46,745 46,084 ––––––––––– –––––––––––

Cost of stocks recognised as an expense (included in cost of sales) through write-down to net realisable

value in the year was €42,000 (2016 - €48,000).

15. LOANS RECEIVABLE

31 March 31 March

2017 2016

€000 €000

Within one year: Wholly due within one year from - fellow subsidiary undertakings 3,072 24,572 Current portion of long term loans receivable - due from fellow subsidiary undertakings - 1,451 - due from unrelated parties 10 9 ––––––––––– –––––––––––

3,082 26,032 After more than one year: - due from associate undertakings 9,927 8,219 - due from fellow subsidiary undertakings - 725 - due from unrelated parties 207 313 ––––––––––– ––––––––––– 10,134 9,257 ––––––––––– –––––––––––

13,216 35,289

––––––––––– –––––––––––

Loans receivable due after more than one year represents amounts due from associated undertakings as

shareholder loans, mostly bearing interest at rates related to LIBOR and due for repayment over the period

up to the year 2027.

€673,000 (2016 - €2,175,000) of loans receivable from group related parties (including fellow

subsidiaries) are guaranteed by the Company’s parent company, Marubeni Corporation.

16. OTHER DEBTORS

31 March 31 March

2017 2016

€000 €000

Advances on merchandise 646 205 Amounts due from fellow subsidiary undertakings 38,713 7,621 Other debtors 2,541 4,425 ––––––––––– –––––––––– 41,900 12,251 ––––––––––– ––––––––––

Marubeni Europe plc


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17. OTHER CREDITORS: amounts falling due within one year

31 March 31 March

2017 2016

€000 €000

Amounts due to fellow subsidiary undertakings 5,513 13,637 Other creditors 746 6,379 ––––––––––– ––––––––––– 6,259 20,016 ––––––––––– –––––––––––

18. TRADE CREDITORS

Trade creditors are non-interest bearing and are on average normally settled on 103 day terms.

19. FINANCIAL LIABILITIES

31 March 31 March

2017 2016

€000 €000

Current Future commodity derivative contracts 234 525 Forward currency hedging contracts 463 1,189 ––––––––––– ––––––––––– 697 1,714 ––––––––––– –––––––––––

Bank Loans 31 March 31 March

2017 2016

€000 €000

Bank loans - wholly due within one year 364 467 - current portion of long term loans 877 946 ––––––––––– ––––––––––– 1,241 1,413 ––––––––––– –––––––––––

- amounts falling due after more than one year

€000 €000 Bank loans 234 1,198 ––––––––––– –––––––––––

There were no bank loans (2016 - none) extending over more than five years. The Company’s obligations

in respect of short term and longer term bank loans are all supported by guarantees, letters of awareness or

a keep-well agreement from the ultimate parent company.

Marubeni Europe plc


36

20. SHARE CAPITAL

Authorised

31 March 31 March

2017 2016

No. No.

Ordinary shares of £1 each 110,000,000 110,000,000

———————— ————————

Ordinary shares of 1 Euro each 102,000,000 102,000,000 ———————— ————————

Authorised

31 March 31 March

2017 2016

€000 €000

Ordinary shares of £1 each 177,023 177,023

—————— ——————

Ordinary shares of 1 Euro each 102,000 102,000 —————— ——————

Total authorised share capital 279,023 279,023 —————— ——————

Allotted, called up and fully paid

31 March 31 March

2017 2016

No. No

Ordinary shares of £1 each 36,163,314 36,163,314

———————— ————————

Ordinary shares of 1 Euro each 27,045,568 27,045,568 ———————— ————————

Allotted, called up and fully paid

31 March 31 March

2017 2016

€000 €000

Ordinary shares of £1 each 58,197 58,197

—————— ——————

Ordinary shares of 1 Euro each 27,046 27,046 —————— ——————

Total issued share capital 85,243 85,243 —————— ——————

Marubeni Europe plc


37

20. SHARE CAPITAL (continued)

Ordinary shares of £1 each are translated to Euros at 1.60928, being the exchange rate ruling at the time of

converting the functional currency from Sterling to Euros.

On 28 May 2009, the Company issued one Ordinary 1 Euro share to Marubeni Corporation at a premium

of €2,123,000, which was credited to the share premium account. The share was issued as consideration

for the purchase of 49% of the outstanding shares of Marubeni Specialty Chemicals (Europe) GmbH

(“MSCE”) from Marubeni Corporation. As a result of this transaction, MSCE became a wholly-owned

subsidiary of Marubeni Europe plc.

On 29 March 2006, the Company issued one Ordinary 1 Euro share to Marubeni Corporation at a

premium of €38,490,999, which was credited to the share premium account. The share was issued in

exchange for all the shares held by Marubeni Corporation in three subsidiaries - Marubeni Iberia S.A.

(“MI”), Marubeni France S.A. (“MF”) and Marubeni Deutschland GmbH (“MD”). Marubeni Europe had

previously acquired all of the trading net assets of these subsidiaries upon the establishment of branch

offices in 1999. In exchange for their net assets, each subsidiary company had received new shares in

Marubeni Europe totalling 4,095,345 of the £1 shares and all 27,045,565 of the €1 shares then in issue.

These shares in Marubeni Europe were the only significant assets in each subsidiary. By acquiring 100%

of the shares in the three subsidiaries on 29 March 2006 Marubeni Europe gained control of 28,800,603

(42.8%) of its own issued shares, the remainder all being held by Marubeni Corporation. Management

intends to liquidate all three subsidiaries and cancel all the shares held by them, leaving Marubeni

Corporation as the sole shareholder. The first such liquidation – of MI – was completed on 30 September

2006, when its assets, consisting principally of its 389,114 £1 shares in Marubeni Europe, were transferred

back to Marubeni Europe for cancellation, which occurred on 8 March 2007.

The second liquidation – of MF – was completed on 23 March 2007. The 3,706,231 £1 shares it held in

Marubeni Europe were also transferred back to Marubeni Europe for cancellation as described below. The

liquidation of MD, which holds 24,705,258 €1 shares in Marubeni Europe, commenced in December 2008

but due to statutory notice periods, and conclusion of the entity’s tax obligations, is not yet complete.

The effect of these transactions is that, as at 31 December 2006, Marubeni Europe held 389,114 of its own

£1 shares surrendered by MI, and indirectly controlled a further 3,706,231 £1 shares and 24,705,258 €1

shares through its investments in MF and MD respectively.

At an extraordinary general meeting on 8 March 2007, a special resolution of shareholders approved the

cancellation of the shares received from MI and, subject to and conditional on its liquidation, MF. On 27

March 2007, MF was duly liquidated, and the shares previously held by MI and MF were subsequently

cancelled.

Presentation in the Company balance sheets: In 2006 shares in Marubeni Europe received from MI were

not included in the balance sheet as an investment but debited at the book value (cost) of the shares to a

specially created capital reserve, a separate component of shareholders’ funds, to reflect the fact that the

shares were subsequently cancelled in March 2007.

On cancellation of 4,095,345 shares in Marubeni Europe received from MI and MF (“cancelled shares”)

in March 2007, the Company recorded a debit to share capital matched by a credit to a specially created

other reserve, a separate component of shareholder’s funds, which does not form part of the distributable

reserves of the Company (note 21). A transfer from this reserve to the profit and loss account, within the

shareholders’ fund, was made to the extent that net assets received in exchange for the original issue of the

cancelled shares represented qualifying consideration as defined in section 3.11 of Technical Release Tech

02/10 issued by the Institute of Chartered Accountants in England and Wales.

Marubeni Europe plc


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20. SHARE CAPITAL (continued)

In 2006 shares in MF and MD were shown as fixed asset investments at their acquisition cost. Following

liquidation of MF, the Company’s investment in MF ceased to exist and its book value was recorded as a

debit in the profit and loss account section of shareholder’s funds, representing a realised loss on

liquidation.

The liquidation of MF in March 2007 resulted in a reduction of the capital reserve balance. The remaining

balance represents the book value of the Company’s investment in MD, which is currently in liquidation.*

*The presentation described above will continue until the liquidation of MD is completed.

21. RESERVES

Analysis by item recognised in other comprehensive income for each component of equity:

Available Cash flow

for-sale hedge Retained Total

reserve reserve earnings Equity €000 €000 €000 €000

Year ended 31 March 2016

Net (loss)/gain on available for sale financial assets (net of tax) (1,387) - - (1,387)

Net movement on cash flow hedges (net of tax) - (2,267) - (2,267)

Actuarial gain on defined benefit pension plans (net of tax) - - 1,715 1,715 —————— —————— ————— ——————

Other comprehensive (loss)/income for the year (1,387) (2,267) 1,715 (1,939) —————— —————— ————— ——————

Year ended 31 March 2017

Net (loss)/gain on available for sale financial assets (net of tax) (9,259) - - (9,259)

Net movement on cash flow hedges (net of tax) - 793 - 793

Actuarial gain on defined benefit pension plans (net of tax) - - (3,376) (3,376) —————— —————— ————— ——————

Other comprehensive (loss)/income for the year (9,259) 793 (3,376) (11,842) —————— —————— ————— ——————

Available for sale reserve

This reserve records fair value changes on available for sale investments. Cash flow hedge reserve The cash flow hedge reserve is used to record the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge.

Marubeni Europe plc


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22. PROVISIONS

€000 At 31 March 2016 795 Increase in provision 112 Foreign exchange movement during the year (38) ––––––––––– At 31 March 2017 869 –––––––––––

Analysed as

Non-current 869

–––––––––––

The Company has made dilapidation provisions for future reinstatement works required for the leased

offices the Company currently occupies. The provisions are based on past experience and through the

advice of specialist surveyors.

23. CONTINGENT LIABILITIES AND COMMITMENTS

At 31 March 2017, the Company had total commitments under non-cancellable operating leases over land

and buildings and other assets as set out below:

Land and buildings

31 March 31 March

2017 2016

€000 €000

Operating leases which expire In less than one year 3,620 2,921 Within two to five years 11,060 9,872 After five years 1,625 3,576 —————— ——————

16,305 16,369 —————— ——————

Others

31 March 31 March

2017 2016

€000 €000

Operating leases which expire

In less than one year 92 107 Within two to five years 42 40 —————— ——————

134 147 —————— ——————

The Company entered into a joint guarantee with Marubeni Corporation to guarantee trading and other

obligations of fellow subsidiaries and associates. At 31 March 2017, contingent liabilities in respect of

these were €80,423,000 (31 March 2016 - €94,347,000).

As at 31 March 2017, the Company is accountable for 72.3% of the net pension liabilities of the UK

multi-employer pension scheme, for which it is the principal sponsoring employer. Effectively, the

Company also has a contingent liability in respect of this scheme should other participating employers be

unable to meet their own obligations.

Marubeni Europe plc


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24. PENSION COMMITMENTS

Summary of pension commitments

31 March 31 March

2017 2016

€000 €000

UK Scheme 12,168 8,865 Overseas branches 6,742 6,126 –––––– ––––––

18,910 14,991 –––––––––– –––––––––––

UK Defined Benefit Pension Scheme

Marubeni Europe plc, in conjunction with other Marubeni group companies in the UK, operates a funded

pension plan. The assets of the Fund are held in a separate trustee administered fund. The Fund closed to

the accrual of future benefits on 31 March 2017. Benefits for all employees from 1 April 2017 will be

accrued in the Company’s defined contributions plans.

Under the defined benefit scheme, each member’s pension at retirement is related to their pensionable

service and final pensionable salary. The weighted average duration of the expected benefit payments is

around 24 years. The defined benefit scheme is operated from a trust, which has assets which are held

separately from the Company, and trustees who ensure the Fund’s rules are strictly followed.

An actuarial valuation as at 31 March 2017 was performed at the accounting date by an independent

qualified actuary in accordance with IAS 19. The most recent full actuarial valuation was carried out as at

1 April 2013, with an updated valuation for the purposes of IAS19 (Revised) performed on the accounting

date, 31 March 2017. As the Company is one of several employers with employees in the scheme, the

figures in the following disclosures reflect the Company’s share of the scheme liabilities. Marubeni

Europe’s portion of the total deficit of the scheme at 31 March 2017 was €12,168,000.

The funding target is for the Fund to hold assets equal in value to the accrued benefits. If there is a

shortfall against this target, then the Company and trustees will agree on deficit contributions. There is a

risk to the Company that adverse experience could lead to a requirement for the Company to make

additional contributions to recover future deficits that arise.

The Company's treatment of actuarial gains and losses are to recognise them immediately through other

comprehensive income.

Contributions are set based on funding valuations carried out every three years; the valuation as at 31

March 2016 is currently in progress. The contributions expected in 2017/18 are currently being agreed

between the Company and Trustees. The Company's current expectation is that the contributions for

2017/18 will be €1,527,000. However, this is subject to an agreement being reached with the Trustees.

In the prior year, the Company held discussions with the Trustees of the Fund in relation to an additional

liability in respect of the Fund’s benefits being calculated on a different basis than that implied by the

Fund’s governing documentation. As at 31 March 2016 an additional liability of €375,000 has been

recognised in respect of this clarification of the scheme’s benefits, being the best actuarially-determined

estimate of the adjustments required. This amount was treated as a past service cost, and accordingly was

charged to the 2015/16 income statement.

Marubeni Europe plc


41

24. PENSION COMMITMENTS (continued)

Movement in the net defined benefit obligation (UK scheme)

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Opening net liabilities (8,865) (8,926)

Expenses charged to profit and loss (183) (644) Amount recognised outside of profit and loss (3,712) 8 Employer contributions 592 697 ––––––– ––––––

Closing net liabilities (12,168) (8,865) ––––––––––– –––––––––––

Reconciliation of the present value of the defined benefit obligation

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Present value of defined benefit obligation at beginning of year 31,785 33,475

Service cost (employer cost) 646 831 Interest cost 1,049 1,083 Members' contributions 138 163 Actuarial (gain)/loss on scheme liabilities due to: Changes in financial assumptions 8,518 (1,481) Changes in demographic assumptions 318 - Experience adjustments on benefit obligations (1,031) 861 Foreign currency exchange rate changes (2,542) (3,028) Benefits paid (448) (494) Past service cost - 375 ––––––– ––––––

Present value of defined benefit obligation at end of year 38,433 31,785 ––––––––––– –––––––––––

Reconciliation of fair value of scheme assets

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Fair value of scheme assets at start of year 22,920 24,549

Interest on scheme assets 767 806

Actuarial (loss)/gain on scheme assets 4,093 (612)

Contributions by the Company 592 697

Contributions by the members 138 163

Benefits paid (448) (494)

Foreign currency exchange rate changes (1,797) (2,189) ––––––– ––––––

Fair value of scheme assets at end of year 26,265 22,920 ––––––––––– –––––––––––

Marubeni Europe plc


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Amounts to be recognised in the balance sheet

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Present value of funded obligation (38,433) (31,785) Fair value of scheme assets 26,265 22,920 ––––––– –––––– Net liability in balance sheet (12,168) (8,865) ––––––––––– –––––––––––

Amounts to be recognised in the income statement

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Current service cost 646 831 Net interest on net defined benefit liability 282 277 Past service cost - 375 Net foreign currency exchange movements (745) (839) ––––––– –––––– Total expense 183 644 ––––––––––– –––––––––––

Total amount recognised in Other Comprehensive Income (OCI)

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Net actuarial gain/(loss)

Changes in financial assumptions (8,518) 1,481

Changes in demographic assumptions (318) -

Experience adjustments on benefit obligations 1,031 (861)

Actual return on scheme assets less interest on scheme assets 4,093 (612)

––––––– ––––––

Actuarial (loss)/gain recognised in OCI (3,712) 8

Recognition of deferred tax asset 594 1,596

––––––– ––––––

Total amounts recognised in OCI (3,118) 1,604 ––––––––––– –––––––––––

Marubeni Europe plc


43


Scheme assets:

Fair Fair value value at 31/03 % at 31/03 % 2017 of assets 2016 of assets €000 €000 Equities 15,898 60.5% 13,199 57.6% Bonds 4,341 16.5% 4,043 17.6% Gilts 5,693 21.7% 5,464 23.8% Other 333 1.3% 214 0.9%

––––––––––– ––––––––––– ––––––––––– –––––––––––

Total scheme assets 26,265 100% 22,920 100%

––––––––––– –––––––––––

Actual return on scheme assets

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Actual return on scheme assets 4,860 194

––––––––– –––––––––

Principal actuarial assumptions at the balance sheet date

31 March 31March

2017 2016

Discount rate 2.5% 3.5%

Rate of increase in salaries N/A 3.0%

Retail Price Index (RPI) inflation 3.2% 3.0%

Consumer Price Index (CPI) inflation 2.2% 2.0%

Pension increases linked to RPI price inflation subject to a maximum of 5% pa: 3.1% 2.0%

Pension increases linked to CPI price inflation subject to a maximum of 2.5% pa: 1.8% 1.7%

Post-retirement mortality:

Life expectancy of male aged 65 in year of accounting date 23.2 23.3

Life expectancy of male aged 65 in year of accounting date + 20 years 25.3 25.5

Life expectancy of female aged 65 in year of accounting date 25.3 25.5

Life expectancy of female aged 65 in year of accounting date + 20 years 27.6 27.5

Marubeni Europe plc


44


Estimated contributions

The employer's best estimate of contributions to be paid to the scheme by the Company next year is

€811,000.

Sensitivity of obligations to alternative assumptions:

at 31/03/2017 at 31/03/2017 €000 €000 Discount rate +0.5% pa -0.5%pa Effect on defined benefit obligation of a 0.5% change (3,513) 3,800 Price inflation +0.5% pa -0.5%pa Effect on defined benefit obligation of a 0.5% change 2,729 (2,666)

Life expectancy -1 year +1 year Effect on defined benefit obligation of a 1 year change (1,307) 1,093

These sensitivities have been calculated to show the movement in the defined benefit obligation in

isolation, and assuming no other changes in market conditions at the accounting date. This in unlikely in

practice – for example, a change in discount rate is unlikely to occur without any movement in the value

of the assets held by the Fund.

UK Defined Contribution scheme

Following the closure of the UK defined benefit scheme to new entrants on the 1 April 2014, the Company

provides a defined contribution (DC) scheme for its eligible employees joining after that date. The amount

recognised as an expense for the DC scheme was €46,000 (2016 - €32,000).

Directors’ pension arrangements

The directors are members of an overseas pension scheme in Japan and are not members of the UK

scheme. No contributions to the scheme in Japan are paid by Marubeni Europe plc, and no benefits are

remitted to the UK. The overseas scheme is funded by the parent company, Marubeni Corporation.

Overseas branches’ unfunded defined benefit pension schemes

The Company operates unfunded defined benefit pension arrangements for its overseas branches, in

accordance with local legal requirements. The total cost to Marubeni Europe plc of these schemes for the

year ended 31 March 2017 was €396,000 (31 March 2016 - €346,000). The accrued provisions for

retirement benefits under these schemes as at 31 March 2017 were €6,742,000 (31 March 2016 -

€6,126,000). An actuarial loss of €272,000 (net of tax of €187,000) was recognised in the Statement of

Other Comprehensive Income in the current year (2016 gain - €181,000).

The most significant of such overseas pension schemes is operated in Germany for staff employed locally

by the German branch. The directors obtained an actuarial valuation as at 31 March 2017 using the

following assumptions: Discount rate of 1.6% (2016 – 2.1%) and increase in salaries of 3.0% (2016 –

3.0%). As the German scheme is unfunded, there are no assets held in trust to meet future benefit

obligations. The movements in the scheme’s liabilities during the year were as follows:

Marubeni Europe plc


45

24. PENSION COMMITMENTS (CONTINUED)

Movement in the net defined benefit obligation (German scheme)

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Opening net liabilities (5,336) (5,238)

Expenses charged to profit and loss (352) (319) Amount recognised outside of profit and loss (272) 221 Benefits paid in the year 88 - ––––––– ––––––

Closing net liabilities (5,872) (5,336) ––––––––––– –––––––––––

Reconciliation of the change in present value of the defined benefit obligation

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Present value of defined benefit obligation at beginning of year 5,336 5,238

Service cost (employer cost) 242 256 Interest cost 110 63 Actuarial loss / (gain) on scheme liabilities due to: Changes in financial assumptions 298 (271) Experience adjustments on benefit obligations (26) 50 Benefits paid (88) - ––––––– ––––––

Present value of defined benefit obligation at end of year 5,872 5,336 ––––––––––– –––––––––––

Amounts to be recognised in the balance sheet

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Present value of unfunded obligation (5,872) (5,336) ––––––– –––––– Net liability in balance sheet (5,872) (5,336) ––––––––––– –––––––––––

Amounts to be recognised in the income statement

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Current service cost 242 256 Net interest on net defined benefit liability 110 63 ––––––– –––––– Total expense 352 319 ––––––––––– –––––––––––

Marubeni Europe plc


46

24. PENSION COMMITMENTS (CONTINUED)

Total amount recognised in Other Comprehensive Income (OCI) – (German scheme)

Year Year

ended ended

31.03.2017 31.03.2016

€000 €000

Net actuarial loss/(gain)

Changes in financial assumptions 298 (271)

Changes in demographic assumptions - -

Experience adjustments on benefit obligations (26) 50

––––––– ––––––

Actuarial loss/(gain) recognised in OCI 272 (221) ––––––––––– –––––––––––

Principal actuarial assumptions at the balance sheet date

31 March 31March

2017 2016


Rate of increase in salaries 3.0% 3.0%

Rate of inflation N/A N/A

Rate of increase in pensions 0.0% 0.0%

Increase of social security contribution ceiling 0.0% 0.0%

Mortality and disability tables Heubeck Heubeck

Richttafeln Richttafeln

2005G 2005G

Retirement ages Men RVAGAnpG RVAGAnpG

Women RVAGAnpG RVAGAnpG

Number of scheme participants

Active 43 44

Vested terminations 5 4

Retirees/Beneficiaries 0 0

Total 48 48

Rates used to determine amounts to be recognised in profit and loss for the year


Rate of increase in salaries 3.0% 2.5%

Rate of increase in pensions 0.0% 0.0%

Sensitivity of obligations to alternative assumptions:

at 31/03/2017 at 31/03/2017 €000 €000 Discount rate +0.5% pa -0.5%pa Effect on defined benefit obligation of a 0.5% change (299) 320 Salary increases +0.5% pa -0.5%pa Effect on defined benefit obligation of a 0.5% change 298 (282)

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25. RELATED PARTY TRANSACTIONS

During the year, the Company entered into transactions, in the ordinary course of business, with other

related parties. The Company has taken advantage of the exemption under paragraph 8(k) of FRS101 not

to disclose transactions with fellow wholly owned subsidiaries. Transactions entered into, and trading

balances outstanding are as follows:

Purchases Amounts Amounts

Sales to from owed from owed to

related related related related

parties parties parties parties

€000 €000 €000 €000

Transactions with subsidiary undertakings

Year ended 31 March 2017 102 582 40 - Year ended 31 March 2016 279 2,727 229 2

Transactions with affiliated companies

Year ended 31 March 2017 24,879 - 13,389 - Year ended 31 March 2016 26,941 - 24,223 -

––––––––––––––– ––––––––––––––– ––––––––––––––– –––––––––––––––

Amounts owed to/from related parties are trade related and arise as part of the normal operations of the

Company. Details of the level of ownership, which Marubeni Corporation has in the above-mentioned

entities, are as follows:

Ownership %

Subsidiary undertakings

Marubeni Cement & Construction Materials Co., Ltd 90.00 Welmar Europe B.V. 85.00 Marubeni Solutions Inc. 80.00 Affiliated companies GFS Renewable Energy Limited 50.00

AGS MCUK Holdings Limited 50.00

EECO Holding 33.33

Yokohama Austria 27.00 Yokohama Iberia S.A. 49.00 Yokohama Reifen GmbH 25.00

–––––––––––––––

Directors’ loans A facility is made available for the Directors of the Company to borrow a maximum of £20,000, repayable on an instalment basis at a LIBOR+ based interest rate. During the year, one director made use of this facility. Mr H Urata had a maximum outstanding balance of £10,308 during the year and made repayments of £10,308 including interest at a rate of 3%, with €nil outstanding at the end of the year.

26. ULTIMATE PARENT COMPANY

The immediate and ultimate parent company and controlling party is Marubeni Corporation, which is

incorporated in Japan. Copies of Marubeni Corporation’s financial statements, which represent the only

group in which this company’s financial statements are included, can be obtained from Marubeni

Corporation’s head office at: Tokyo Nihombashi Tower, 7-1, Nihonbashi 2-chome, Chuo-ku, Tokyo, 103-

6060, Japan.

MARUBENI EUROPE PLC€¦ · Marubeni Europe plc DIRECTORS’ REPORT 5 Registered No. 01885084 The...

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Transcript of MARUBENI EUROPE PLC€¦ · Marubeni Europe plc DIRECTORS’ REPORT 5 Registered No. 01885084 The...